September 23, 2009

As President Obama prepares to host the leaders of the Group of 20 nations at an economic summit meeting this week in Pittsburgh, American officials say they are optimistic about reaching agreement on strategies to rein in practices that led to the current financial crisis.Though differences persist, administration officials said a rough consensus had been reached on broad lessons from the crisis.

The firmest area of agreement at the two-day meeting this Thursday and Friday is likely to be on the need for higher capital reserve requirements at banks and other financial institutions.Requirements on capital reserves — safety cushions against losses — are at the heart of the risk-taking behavior of financial institutions. Higher reserve requirements mean that institutions have less latitude to leverage their investments with large amounts of borrowed money.